Comparing Existing Wind Lease Economics Against New Site Potential
- LandGate
- 3 days ago
- 4 min read
The wind energy landscape in the U.S. is maturing, and with a significant portion of early-era wind farms approaching 20-30 years of operation, the decision to repower—replacing old turbines with newer, more efficient models—is becoming a critical financial consideration. Repowering allows developers to leverage existing infrastructure, such as access roads, transmission lines, and established lease agreements, dramatically reducing the capital expenditure and permitting time of a brand-new "greenfield" project.
However, the question remains: is repowering an existing site more financially attractive than developing a new project? The answer lies in a rigorous, data-driven comparison of the existing lease economics versus the new site potential, a process where comprehensive data and valuation tools are indispensable.
The Repowering Dilemma: Existing Assets vs. New Opportunity
When considering repowering, developers are essentially weighing the knowns against the unknowns:
Existing Site Economics (The Known):Â The cost and revenue structure tied to the current project, including the established land lease payments, proximity to existing grid infrastructure, and proven (though declining) production rates.
New Site Potential (The Unknown):Â The projected economics of a greenfield site, offering superior wind resources, modern turbine technology, and potentially more favorable lease terms, but requiring significant new capital outlay for all infrastructure.
The core challenge is accurately valuing the economic trade-offs, particularly the value of the underlying land leases and resource potential.
Quantifying Existing Lease Economics
The lease terms for a 20-year-old wind farm were established under different market conditions and technology standards. To accurately assess the value of repowering, you must first quantify the existing lease's financial burden and benefits.
Current Land Lease Payments
Repowering is often contingent on extending the original land lease, meaning developers must project the cost of these payments for the life of the new turbines.
LandGate Data in Action: LandGate’s platform provides up-to-date, localized lease payment comparables for wind energy. By analyzing thousands of transactional data points and current market offerings for wind leases, LandGate allows developers to benchmark the original lease's payment structure against today's fair market value.
Example:Â If an existing lease pays a flat $4,000/$MW/year, and LandGate data shows the current market average for comparable sites in that region (considering wind velocity, proximity to transmission, and capacity) is $7,000/$MW/year, the developer gains a clear negotiating advantage or can quantify the long-term cost savings of the existing, sub-market lease rate.
Value of Existing Infrastructure
The primary economic benefit of repowering is the ability to reuse infrastructure. The financial value of this reusability needs to be accurately quantified:
Grid Access and Interconnection: The existing interconnection agreement and proximity to a substation are massive assets. LandGate’s Interconnection Queue and Available Transfer Capacity (ATC) data can be used to model the current grid constraints and capacity, directly translating the value of avoiding a multi-year, multi-million-dollar greenfield interconnection process into a hard dollar figure.
Analyzing New Wind Lease Site Potential with Financial Comparables
The alternative to repowering is developing a new, high-potential site. Developers must use data-driven financial comparables to gauge the true opportunity cost of selecting a greenfield project over repowering.
Valuing the Resource: Wind Quality and Production
New sites are selected for their superior wind resource. Determining the potential revenue requires precise, high-resolution wind data.
LandGate Data in Action: LandGate offers proprietary, granular wind data, including average wind velocity and modeled energy production estimates for every parcel in the U.S. This data is used to run a discounted cash flow (DCF) analysis on a potential new site.
Comparisons:Â A financial model can compare the projected Annual Energy Production (AEP)Â of a repowered site (using new, high-hub-height turbines) against the AEP of a greenfield site (which may have better baseline wind conditions). This delta in MWh is the most crucial revenue-driver for the comparison.
Benchmarking Greenfield Lease Payments
Accurate budgeting for a new project requires reliable figures for land acquisition or leasing.
LandGate Data in Action:Â By providing the estimated Fair Market Rent (FMR)Â for wind leases on all available parcels, LandGate enables developers to budget accurately. This FMR is calculated based on site-specific resource quality, regulatory constraints, and infrastructure proximity.
Key Metric: Comparing the estimated LandGate FMR for a high-potential greenfield site against the effective cost of extending the existing site’s lease reveals the difference in long-term operational costs. This difference is a crucial input in the final Net Present Value (NPV) calculation.
The Financial Verdict: NPV and Internal Rate of Return (IRR)
The final decision hinges on which option offers the superior financial return. This is typically done by comparing the Net Present Value (NPV)Â or Internal Rate of Return (IRR)Â of the two scenarios.
Financial Variable | Repowering Scenario (Existing Site) | Greenfield Scenario (New Site) | LandGate Data Contributes |
Capital Expenditure (CapEx) | Low (Reuses infrastructure) | High (New everything) | Interconnection/ATC, Topography |
Operating Expense (OpEx) | Higher (Potential for aging infrastructure issues) | Lower (New, reliable equipment) | Market Comparables for O&M Costs |
Land Lease Cost | Known/Negotiated (Often below FMR) | Estimated FMR (Current market rate) | Wind Lease Comparables |
Annual Energy Production (AEP) | Good (New turbines, but established wind) | Excellent (Best-in-class wind resource) | Modeled Wind Velocity and AEP |
Time-to-Operation | Fast (Less permitting/interconnection time) | Slow (Full permitting and grid queue) | Interconnection Queue Status |
The financial model must utilize all these data points:
Calculate Repowering NPV/IRR:Â Use the existing lease cost, lower CapEx (value of reused infrastructure), and the moderate revenue from the new turbine AEP.
Calculate Greenfield NPV/IRR:Â Use the higher CapEx, LandGate's estimated Fair Market Rent, and the optimal revenue from the superior AEP.
The path with the highest positive NPV and acceptable IRR is the clear winner. In many cases, the massive CapEx savings from reusing infrastructure often makes the repowering scenario financially compelling, even if the absolute wind resource is slightly inferior to a prime greenfield location.
By providing a unified, data-rich platform for both greenfield site analysis (wind resource, FMR) and existing project due diligence (interconnection, local comparables), LandGate empowers wind farm developers and asset owners to move from generalized market assumptions to precise, parcel-specific financial modeling when making multi-million-dollar repowering decisions. To learn more, book a demo with our dedicated energy infrastructure team.
